WORLD FOREX: Yen Drops Vs Rivals; Intervention Unconfirmed

AndrewMonahan

TOKYO (MarketWatch) -- The yen weakened sharply against the dollar, euro and other rivals Friday afternoon in Asia, prompting speculation that the Japanese government had again waded into markets to curb the currency's strength, though no such move was confirmed and the currency soon retraced much of its initial gains.

At around 0415 GMT, the yen weakened suddenly, with the dollar jumping from around Y84.60 to a fresh intraday high at Y85.40 in a matter of minutes. The euro jumped from around Y112.95 to a high at Y113.75.

"The price action is very specific and strange," bearing the marks of government intervention, said Minoru Shioiri, chief manager of foreign exchange trading at Mitsubishi UFJ Morgan Stanley Securities.

But Shioiri and other traders said they had not seen any direct signs of intervention.

"There's no doubt Japanese banks were buying a lot (of dollars against the yen), though it's not clear whether this was related to any government action," said a senior foreign exchange dealer at a major European bank in Tokyo. "I'd say the odds were about fifty/fifty it was intervention."

A senior trader at a major Japanese bank said he thought the jump in the dollar against the yen came after Japanese market participants over-reacted to buying by overseas names. "I think you'll see the dollar/yen come back down," he said.

Japanese Finance Minister Yoshihiko Noda said he had no comment when asked by a reporter at the Finance Ministry whether Japan had intervened. The Finance Ministry is in charge of decisions on intervention in Japan, with the Bank of Japan acting as agent.

Japanese authorities intervened in the currency market on Sept. 15 for the first time in more than six years. Shortly after Tokyo began buying dollars and selling yen, Finance Minister Noda held a press conference and announced the move. If Tokyo were back in the market Friday, it would mark a starkly different approach, as no public statements were forthcoming.

At 0450 GMT, the dollar was at Y85.17, up from Y84.34 late Thursday in New York. The euro was at Y113.54 from Y112.32. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the yen, was at 80.138 compared with 80.099.

Whether or not the Japanese government was behind the fall in the yen Friday, it remains clear that the administration of Prime Minister Naoto Kan remains deeply concerned over the damage the strong currency exerts on the export-driven economy.

At a press conference Friday morning in Tokyo, Finance Minister Noda reiterated that Japan would take "decisive" steps to curb yen strength if necessary. At a separate press conference, Banri Kaieda, minister of state for economic and fiscal policy, cited the strong yen as a downside risk for an economy he said had entered a lull.

Elsewhere, the euro stood at $1.3333 against the dollar at 0450 GMT compared with $1.3317 late Thursday in New York.

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